Iron ore slips as China Covid surge spurs volatility
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IRON ore futures slipped in volatile trade on Wednesday (Jan 4), as Covid-19 disruptions and lingering concerns over the weak real estate market in China outweighed optimism around the country’s reopening and economic stimulus measures.
The most-traded May iron ore on China’s Dalian Commodity Exchange ended daytime trade 0.4 per cent lower at 846.50 yuan (S$164.5) a tonne, surrendering early gains.
On the Singapore Exchange, the steelmaking ingredient’s benchmark February contract was down 1.2 per cent at US$114.70 a tonne, as of 0713 GMT.
Home prices in China, the world’s top steel producer, fell at a faster pace in December, according to a private survey, reflecting persistently weak demand amid rising Covid cases, despite a slew of support measures for the ailing property sector.
“We maintain our view that underlying steel consumption from China’s property sector is unlikely to recover meaningfully in the next 3-6 months,” Citi analysts said in a Jan 3 note.
“The property sector continues to face challenges. Job security and consumer confidence remain challenging and the current wave of Covid infections remains a headwind,” they said.
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Other Dalian steelmaking inputs also fell, with coking coal and coke down 2.3 per cent and 1 per cent, respectively.
Steel benchmarks were mixed, with rebar on the Shanghai Futures Exchange down 0.4 per cent, while hot-rolled coil gained 0.1 per cent.
Stainless steel rose 1.7 per cent as prices of raw material nickel rose in Shanghai and on the London Metal Exchange.
Overall sentiment, however, has been more positive than in recent months. Iron ore spot prices have risen about 47 per cent to around US$117 a tonne this week from US$80 levels in November.
“Iron ore has been and will likely continue to be the China reopening trade,” Citi analysts said, projecting prices to hit US$130 a tonne in the near term to take into account likely further stimulus announcements and re-stocking. REUTERS
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